The Police didn't have the dirt on them to nail them. It wasn't about power. Harvey Dent was a D.A. not man power. Isn't that what Dent's approach was about, targeting the businesses suspected for fronting for Grissom. Napier said to Grissom Dent was sniffing around their front companies. That's why he was panicking about the Axis connection. "If he ties us in with Axis Chemicals we're dead and buried. We should move immediately". Getting the evidence to nail them.

I don't see why it wouldn't.

But the streets were not cleared. It was teeming with people. Since the Police showed up after the event (typical movie cliche of the Cops showing up late), they were obviously not leaving it for Batman to handle. Which would be rather stupid anyway since Batman had not won their favor by this point. They were still dubious about him.

Just because it's in a fictional world doesn't mean that all logic ceases. If we're in a world where a D.A. can nail the crime, where corrupt Cops can exist, then the Mayor, Police Commissioner, and the crime tackling D.A. taking steps to nail the biggest threat to the City after he's publicly handed himself to them on a plate is not an unreasonable expectation. The press managed to be there to snap photos. The Police should have been there, too, waiting for Joker.

The movie has plot holes. That's just one of them.

The Mayor said it at the beginning of the film. "Our streets are overrun, our public officials are helpless, etc.." I'm talking about man-power here. Maybe they simply didn't have the men. I don't know. I think the state of the police force is made clear through the actions of someone like Eckhart... remember what he said? Shoot to kill, know what I mean? And nobody batted an eye. I think the film tried to at least make some effort to show you the police force was not a force of "good." But I think you're not going to accept that these could be valid points and/or possibilities as to why they acted (or didn't) act towards the end of the film. And that's all good and fine too. I hope it doesn't detract from your enjoyment of the movie. At this point I'm picking it apart far too much, even for myself.